Credit Evaluation School Instructor eBook - Oct 2023

Internal Use Only

SOURCES OF REPAYMENT

• Conversion of current assets to cash • Sale of non-current assets • Replacing debt with debt - refinancing • Equity injection

• Conversion of current assets into cash – like a factory makes a product, sells the product, and uses the cash to pay down on the line. As more orders are received, borrow funds to manufacture product, and cycle starts over again. • Sale of non ‐ current assets – business sells off a machine and pays off the debt. Business sells off an unneeded piece of real estate and pays off the debt. • Replacing debt with debt – business refinances its existing debt with lower payment or more favorable terms • Equity injection.